Sure, we'd all like to see federal taxes cut. And with the
presidential election just around the corner, now's your chance
to cast your vote-not just for a candidate, but also for how you
want this country's tax policy shaped.

Texas governor George W. Bush and Vice President Al Gore are
both calling for reductions in taxes; however, the two have tax
plans that vary in detail and scope. For the most part, the major
differences stem from how the two candidates plan to spend future
budget surpluses accumulated from outside the Social Security
program. Bush wants Washington to distribute a large amount of
those surpluses to taxpayers in the form of tax cuts. Gore, on the
other hand, says he wants to pay down the debt and put the
surpluses back into Social Security, as well as use them to help
fortify Medicare.

Bush favors across-the-board income-tax cuts; Gore is in favor
of more modest reductions that target specific areas, such as
education and retirement savings. As far as small businesses are
concerned, tax experts who've analyzed the two programs say
Bush has offered a larger number of tax proposals in that area than
Gore. "Vice President Gore's first approach through tax
changes is going to be individual-based, allowing much more
[personal] savings," says Mike Petrecca, a partner with
PricewaterhouseCoopers in Columbus, Ohio.

Joan Szabo is a writer in Great Falls, Virginia, who has
reported on tax issues for more than 13 years.

The Bush Plan

Bush has made taxes the centerpiece of his presidential
campaign, pointing out that Americans now work more than four
months per year on average to fund government at all levels. The
Texas governor insists deep reductions are necessary to sustain the
nation's record economic growth. He wants a $483 billion tax
cut over five years, and as much as $1.2 trillion over 10 years.
Under his plan, tax reductions would be financed exclusively out of
the non-Social Security surplus.

Regarding Social Security, Bush supports legislation that would
wall off the program's surplus from the rest of the budget. He
has said he would reserve $2 trillion in excess Social Security
revenues over the next decade to overhaul the retirement system. He
says he'd also gradually reduce marginal income-tax rates, so
taxpayers would receive an income-tax cut, and he would like to
replace the current five-rate structure of 15, 28, 31, 36 and 39.6
percent with four lower rates of 10, 15, 25 and 33 percent.

In addition, Bush wants to provide marriage-penalty relief by
allowing the lower-earning spouse of two-earner couples to deduct
10 percent of earnings up to $30,000, or a maximum deduction of
$3,000. He would raise the threshold for phasing out the child tax
credit from $110,000 to $200,000 for married couples and from
$75,000 to $200,000 for single parents.

Bush says that his plan is geared toward helping lower- as well
as middle-income people, especially families who are trying to get
to the middle class. While his plan would help many people in the
$20,000 income range, critics of his proposals claim that the large
majority of tax cuts would go to the top 1 percent, or those
earning more than $300,000 a year. He has also proposed extending
the deduction for charitable contributions to some 80 million
taxpayers who don't itemize. Under existing law, those who
don't itemize on their tax returns are not able to take tax
deductions for donations they make to charities and other nonprofit
organizations.

In terms of education, Bush says he'd like to increase the
existing annual contribution limit on savings accounts for
education from $500 to $5,000 per child. Under current law,
contributions are not deductible, but interest and dividends that
build up are tax-free, and amounts withdrawn from the accounts
under a certain set of circumstances aren't taxed.

As far as business is concerned, Bush supports an extension of
the moratorium on Internet-sales taxation at least through 2006 and
is opposed to taxes on Internet access. "This proposal would
be a benefit for people in e-commerce," says Clint Stretch,
director of tax policy for Deloitte & Touche in Washington, DC.
Currently, a three-year moratorium is in place. A special
commission set up by congress to devise a more uniform approach to
taxing Internet sales recently called for a five year extension on
the moratorium.

But there are drawbacks to continuing the moratorium for
businesses not selling on the Internet, Stretch points out.
"If you operate a brick-and-mortar establishment, a moratorium
on Internet taxation is not all that helpful, because you're
going to have sales-tax collection obligations in all the places
where you have stores." In addition, he says, "Business
would probably rather have a rational solution to this whole set of
issues as opposed to just continuing with the moratorium."

That's not all that would benefit entrepreneurs: Bush would
also like to make the research and development (R&D) tax credit
a permanent part of the tax code. In addition, as a big plus for
family business owners and very wealthy individuals, Bush proposes
to phase out the federal estate tax by 2009. The effect of such a
plan would allow all taxpayers, no matter how wealthy, to pass on
their estates free of all federal taxes.

To date, Bush has yet to offer proposals that would reduce
corporate taxes, says Stretch. But Bush has said he would veto any
increase in corporate income-tax rates. At press time, he also has
not yet offered proposals that would provide additional relief in
capital-gains taxes, Stretch adds, which is a tax change a lot of
entrepreneurs definitely want.

What Gore Wants

Where does Gore stand on taxes? Well, big tax reductions
aren't a big part of his agenda-although he has said he
would allocate $250 billion to $300 billion in tax cuts over the
next decade by expanding tax incentives for education and
retirement savings. One of his major proposals: To create so-called
"life-long learning accounts." Under this plan, earnings
invested in these accounts could be withdrawn and used tax-free if
they go to pay for education or "qualified" lifelong
learning.

To encourage greater savings for retirement, Gore wants to
encourage the 70 million to 80 million Americans who currently
don't have access to either Individual Retirement Accounts or
401(k)s to set up what he calls "USA Accounts."

Gore says that he would like to provide marriage-penalty relief
by increasing the standard deduction so that married couples would
be able to get the same standard deduction as if they remained
single. Under his plan, the standard deduction would rise by $1,400
for married couples who claim it.

And as far as business taxes are concerned, the vice president
is in support of the current moratorium on Internet-sales taxation,
according to a Gore campaign aide. But the vice president has yet
to state exactly how he'd deal with the Internet sales-tax
issue once the moratorium expires. Gore also supports making the
R&D tax credit permanent, but has also said the credit needs to
be reformed, especially with respect to small businesses. He is of
the belief that a partially refundable credit for small businesses
represents a "sound investment."

In addition, it is likely that Gore will follow the lead of the
Clinton administration's anti-tax-shelter, anti-loophole
approach, says Stretch. Among the proposals that are being offered
by Clinton is one to set up new disclosure requirements for any
corporate tax transactions that might indicate some kind of
sheltering. Clinton also has plans to increase penalties to 40
percent from 20 percent for substantially understating corporate
taxes related to shelters.

Outlook In Congress

How these various proposals will actually fare once the results
of the presidential election are known remains an open question.
But that hasn't stopped tax analysts from speculating. For
example, if Bush wins the election, he will have his work cut out
for him. Trying to persuade Congress, especially one that may be
controlled by Democrats, that large tax cuts are needed won't
be easy. In the long run, Stretch believes much will depend on how
the Bush tax plan is viewed by financial markets, pollsters and
lawmakers. Says Stretch, "If everyone tells him the size of
the cuts will put the stock market into a severe tailspin, he
probably won't go for such a large tax cut."

On the other hand, if Gore is victorious-and if he faces a
GOP-controlled Congress-compromise may indeed end up ruling the
day. "A Congress dominated by Republicans may eventually
accept some of Gore's tax proposals in order to win some of the
GOP business tax-ideas, such as an extension of the moratorium
placed on Internet sales taxes," says Petrecca. Stretch is in
agreement that such a Congress is very likely to compromise with
Gore and pass a smaller tax package than the GOP really wants to
pass. "A small package would be far better than nothing at
all," he adds.

In the meantime, the political give-and-take will most likely
continue all the way up until the first Tuesday in November, when
the voters will get to take it upon themselves to make the ultimate
decision on just what kind of tax changes-not to mention
president-they want.